Foreign banks granted gold import licenses for the first time in China

January 15, 2014 08:28 AM


For the first time in history, the Chinese authorities have granted gold (COMEX:GCG14) import licenses to two foreign banks operating in the country. ANZ and HSBC are the two nominated banks to receive gold import permits. The move is aimed at boosting gold supply into the country which in turn will knock down the existing high gold premiums in the country.

Currently only nine local banks are allowed to ship gold into China. According to trading sources, another local bank- China Everbright Bank has also been allowed to import gold into the country, thus making the total number of local bank import licenses to 10. Adding up the two foreign banks, altogether only 12 banks in China have permit to import gold.

The granting of new licenses is expected to ease restrictions on bullion trading. However, one must wait and see whether the move will effectively boost gold imports into the country. The limited number of import licenses and the strict controls on import through quota system had led to gold supply crunch in China during early-2013. As a result, gold premiums in China tend to be higher when compared with rest of Asia.

According to Thomson Reuters GFMS, the move is a clear indication that the strong Chinese physical demand witnessed in 2013 may likely continue in 2014 as well. They further believe that the award of more number of licenses would increase its transparency.

Incidentally, ANZ and HSBC were the first two foreign banks to get Chinese nod in 2011 for gold futures trading in Shanghai Futures Exchange.

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